DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board
Civil Remedies Division
In the Case of:
DeWayne Franzen,
Petitioner,
- v. -
The Inspector General.
DATE: December 13, 1989
Docket No. C-96
DECISION AND ORDER
In this case, governed by section 1128 of the Social Security Act (Act), Petitioner
filed a timely request for
a hearing before an Administrative Law Judge (ALJ) to contest the December 23,
1988 notice of
determination (Notice) issued by the Inspector General (I.G.). The Notice advised
Petitioner that an
exclusion was being imposed and directed against him for a minimum period of
five years based upon his
conviction of a criminal offense related to the delivery of an item or service
under the Medicaid program.
Based on the entire record before me, I conclude that: (1) there are no material
facts at issue, (2) Petitioner
is subject to the minimum mandatory exclusion provisions of sections 1128(a)(1)
and 1128(c)(3)(B) of the
Act, and (3) based upon the facts of Petitioner's case, a five-year period of
exclusion is mandated.
APPLICABLE STATUTES AND REGULATIONS
I. The Federal Statute.
Section 1128 of the Social Security Act (Act) is codified at 42 U.S.C.A. 1320a-7
(West Supp. 1989).
Section 1128(a)(1) of the Act requires the I.G. to impose and direct exclusion
from participation in the
Medicare and Medicaid programs those individuals or entities who are "convicted"
of a criminal offense
"related to" the delivery of an item or service under the Medicare
or Medicaid programs. Section
1128(c)(3)(B) provides that the period of exclusion for those excluded pursuant
to section 1128(a)(1) shall
be for a minimum of five years.
Section 1128(b) of the Act permits the I.G. to impose and direct exclusions
from participation in the
Medicare and Medicaid programs against individuals or entities who have engaged
in other types of
impermissible conduct.
II. The Federal Regulations.
The governing federal regulations (Regulations) are codified in 42 C.F.R. Parts
498, 1001, and 1002
(1988). Part 498 governs the procedural aspects of this exclusion case; Parts
1001 and 1002 govern the
substantive aspects.
Section 1001.123 requires the I.G. to issue an exclusion notice to an individual
whenever the I.G. has
"conclusive information" that such individual has been "convicted"
of a criminal offense "related to" the
delivery of a Medicare or Medicaid item or service; the exclusion to begin 15
days from the date on the
notice
BACKGROUND
I conducted a prehearing conference by telephone on July 18, 1989. The parties
agreed that this case could
be decided based upon documentary evidence and briefs. The parties submitted
stipulations and agreed
findings of fact, and a stipulation as to the authenticity of eight joint exhibits.
The I.G. submitted a brief in
support of his motion for summary disposition. Petitioner submitted a brief
which supported his motion
for summary disposition and which opposed the I.G.'s motion for summary disposition.
The I.G. also
submitted a reply brief.
Petitioner admitted that he was "convicted" of criminal offenses
within the meaning of section 1128(i) of
the Act. P. Br. 2, 4.
ISSUES
The issues are:
1. Whether Petitioner's convictions are "related to the delivery of an
item or service" under the Medicaid
program within the meaning of section 1128(a)(1) of the Act.
2. Whether Petitioner is subject to the minimum mandatory five year exclusion
provisions of sections
1128(a)(1) and 1128(c)(3)(B) of the Act.
3. Whether the principles espoused in the recent United States Supreme Court
decision in United States v.
Halper, 109 S.Ct. 1892 (1989), bar the I.G. from excluding Petitioner.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. Petitioner is a pharmacist who, at all times relevant to this case, was the
owner and pharmacist at
Bessemer Pharmacy in Greensboro, North Carolina. Stip. 1.
2. Petitioner was charged in Guilford County District Court with three misdemeanor
counts of violating
North Carolina General Statutes (N.C. Gen. Stat.) sections 90-85.29 and 90-85.40
(false prescription
labeling), and one misdemeanor count of violating N.C. Gen. Stat. sections 90-106(c)
and 90-108(a)(2)
(unlawful dispensing of a controlled substance). J. Ex. 1,3,5,7.
3. On January 27, 1988, Petitioner pled guilty to all four charges and judgment
was entered against him.
Stip. 4; J. Ex. 2,4,6,8.
4. Petitioner violated the "False Prescription Labeling" provisions
of N.C. Gen. Stat. sections 90-85.29 and
90-85.40 by placing brand name prescription labels on bottles in which generic
drugs were dispensed.
Stip. 8; J. Ex. 1,3,5.
5. Petitioner violated the "Unlawful Dispensing of a Controlled Substance"
provisions of N.C. Gen. Stat.
sections 90-106(c) and 90-108(a)(2) by unlawfully refilling a prescription for
a controlled substance more
than five times after the date of the prescription. Stip. 8; J. Ex. 7.
6. In each of the three instances where Petitioner was convicted of false prescription
labelling, the drug
product was dispensed to a Medicaid recipient. In the one instance where Petitioner
was convicted of
unlawfully dispensing a controlled substance, the controlled substance was dispensed
to a Medicaid
recipient. Stip. 9; J. Ex. 1,3,5,7.
7. Petitioner submitted a claim for reimbursement to the Medicaid program in
each of the charges for
which he was convicted. Stip.9.
8. Petitioner was reimbursed by the Medicaid program for each of the claims
which he submitted.
Payment to Petitioner by the Medicaid program resulted in an overpayment. Stip.
9.
9. Petitioner was sentenced to pay a fine of $1,000.00, plus $40.00 in court costs. Stip. 5; J. Ex. 2, 4, 6, 8.
10. Petitioner was ordered to make restitution in the amount of $4,000.00 to
the North Carolina Medicaid
Program. Stip. 6; J. Ex. 2, 4, 6, 8.
11. Section 1128(a)(1) of the Act requires the I.G. to impose and direct exclusions
from participation in
the Medicare and Medicaid programs against individuals who are convicted of
a criminal offense "related
to the delivery of an item or service" under the Medicare or Medicaid programs.
12. Petitioner admitted that he was "convicted" of criminal offenses
within the meaning of section 1128(i)
of the Act. P. Br. 4.
13. The criminal offenses for which Petitioner was convicted are "related
to the delivery of an item or
service" under the Medicaid program. FFCL 4 - 8, 10.
14. Petitioner is subject to the minimum mandatory provisions of section 1128(a)(1)
of the Act. FFCL 12,
13.
15. The I.G. properly imposed and directed an exclusion against Petitioner
from participation in the
Medicare and Medicaid programs for a minimum mandatory period of five years.
FFCL 14.
16. The principles espoused in the recent United States Supreme Court decision
in United States v. Halper,
109 S.Ct. 1892 (1989), do not bar the I.G. from imposing and directing exclusions
from participation in the
Medicare and Medicaid programs against Petitioner.
DISCUSSION
I. Petitioner's Convictions "Related to the Delivery of an Item or Service"
Within The Meaning of Section
1128(a)(1) of The Act.
Section 1128(a)(1) of the Act requires the I.G. to impose and direct exclusions
against individuals who are
convicted of a criminal offense which is related to the delivery of an item
or service under the Medicare or
Medicaid program. Thus, in order for Petitioner to be properly excluded from
participation in the
Medicare and Medicaid programs, he must satisfy a two-part test. First, he must
be "convicted" of a
criminal offense within the meaning of section 1128(i) of the Act; and second,
the conviction must be
"related to the delivery of an item or service" under the Medicare
or Medicaid programs.
In this case, the first part of the test has been satisfied in that Petitioner
has admitted that he was
"convicted" of criminal offenses within the meaning of section 1128(i)
of the Act. FFCL 12. However,
Petitioner argues that the I.G. has not satisfied the second part of the test
because the criminal offenses for
which Petitioner was convicted are not "related to the delivery of an item
or service" under the Medicare or
Medicaid programs. Petitioner argues that section 1128 authorizes the exclusion
of individuals who are
convicted of a criminal offense which is related to the delivery of an item
or service under the Medicaid
program only in instances where such individual possessed criminal intent in
the commission of the
offense.
I do not agree that a determination of whether a relationship exists between
the criminal offense for which
Petitioner is convicted and the delivery of an item or service under the Medicaid
program should be based
upon whether Petitioner intended to disobey the law.
The provisions of section 1128(a)(1) do not require that the individual must
intend to commit the criminal
offense in order for an exclusion to be proper. Section 1128(a)(1) requires
only that there be a
"reasonable" relationship between the criminal offense and the delivery
of an item or service under the
Medicaid program.
Petitioner's judgments of conviction state that a factual basis existed for
the charges against Petitioner and
that Petitioner pleaded guilty to each charge. Petitioner stipulated that the
Misdemeanor Statement of
Charges (Charges) accurately state the factual basis for each of the convictions.
FFCL 3-6. The facts
stated in the Charges were that: (1) in three instances, Petitioner mislabeled
prescriptions dispensed to
Medicaid recipients by placing the brand name label on the product when, in
actuality, a generic product
was dispensed, and (2) in one instance, Petitioner improperly refilled a Medicaid
recipient's prescription for
a controlled substance more than five times after the date of the prescription.
FFCL 3-6. Further,
Petitioner stipulated that a claim for reimbursement from the Medicaid program
was submitted for each
charge at issue. FFCL 8.
Pharmacists, such as Petitioner, play a key role in the dispensing of prescription
medications. Doctors who
prescribe medications for their patients and the patients who receive the medications
trust that the
pharmacist will provide the medication which has been prescribed. The Medicaid
program which
reimburses pharmacists for the items or services which they provide to Medicaid
recipients trust that the
pharmacist's claim will accurately reflect the item or service which has been
provided and that the
pharmacist will provide the Medicaid recipient with the item or service in both
a professional and legal
manner. A breach of these duties by an individual so charged with them, and
a conviction resulting from
the breach, represents a conviction for a criminal offense which is directly
"related to the delivery of an
item or service" under the Medicaid program. Petitioner was such an individual.
The criminal offenses
for which Petitioner was convicted constitute a direct relationship between
the delivery of an item or
service under the Medicaid program. See H. Gene Blankenship v. The Inspector
General, DAB Docket
No. C-67 (9/7/89).
Further, the relationship between the criminal offenses for which Petitioner
was convicted and the
Medicaid program may also be found based upon the financial impact which Petitioner's
criminal offense
had on the Medicaid program. Petitioner submitted claims for reimbursement for
services which were not
provided as claimed. Petitioner admits that he received an overpayment from
the Medicaid program as a
result of the claims submitted for the charges at issue. FFCL 8-10. In the case
of Jack W. Greene v.
Inspector General, DAB Docket No. C-56, decided January 31, 1989, appeal docketed,
DAB No. 89-59,
Decision No. 1078 (1989), a review panel of the Departmental Appeals Board addressed
this argument and
held that "the false Medicaid billing and the delivery of the drugs to
the Medicaid recipient are inextricably
intertwined and therefore 'related' under any reasonable reading of that term".
Based on the above, I conclude that Petitioner's convictions are "related
to the delivery of an item or
service" under the Medicaid program within the meaning of section 1128(a)(1)
of the Act.
II. A Minimum Mandatory Five Year Exclusion Was Required In This Case.
Section 1128(a)(1) of the Act clearly requires the I.G. to exclude individuals
and entities from the
Medicare program, and to direct that they be excluded the Medicaid program,
for a minimum period of five
years, when such individuals or entities have been "convicted" of
a criminal offense "related to the delivery
of an item or service" under the Medicare or Medicaid programs within the
meaning of section 1128(a)(1)
of the Act. Congressional intent on this matter is clear:
A minimum five-year exclusion is appropriate, given the seriousness of the
offenses at
issue. . . . Moreover, a mandatory five-year exclusion should provide a clear
and strong deterrent against
the commission of criminal acts.
S. Rep. No. 109, 100th Cong., 1st Sess. 2, reprinted in 1987 U.S. Code Cong. & Admin. News 682, 686.
Since Petitioner was "convicted" of criminal offenses which are "related
to the delivery of an item or
service" under the Medicaid program within the meaning of section 1128(a)(1)
and (i) of the Act, the I.G.
was required to exclude Petitioner for a minimum of five years.
III. The Principles Espoused In The Recent Case Of United States v. Halper Do
Not Apply To This Case.
In United States v. Halper, 109 S. Ct. 1892 (1989), the Supreme Court held
that under some circumstances
the imposition of civil penalties may violate the Double Jeopardy Clause of
the Sixth Amendment to the
United States Constitution. The Court held that the imposition of a penalty
under the False Claims Act, 31
U.S.C. 3729-3231, could constitute double jeopardy in the narrow circumstance
where: (1) there was a
prior federal criminal conviction, (2) based upon the same false claims for
which a civil penalty was being
imposed, and (3) there was no reasonable relationship between the amount of
the penalty sought and the
damages suffered by the government as a result of the false claims at issue.
This case is distinguishable, both legally and factually, from Halper. First,
this case involves a state
conviction whereas Halper involved a federal conviction. Double jeopardy does
not apply to a subsequent
federal prosecution based on facts which led to a state conviction. Chapman
v. U.S. Dept. of Health &
Human Services, 821 F.2d 523 (10th Cir. 1987); Abbate v. United States, 359
U.S. 187 (1959). See also,
Crofoot v. United States Government Printing Office, 761 F.2d 661, 665 (Fed.
Cir. 1985). Secondly, the
primary purpose of section 1128 of the Act is to protect the Medicare and Medicaid
programs, not
punishment. Finally, Halper involved different factual circumstances -- the
federal government was
attempting to recover approximately $130,000 in civil penalties based on an
individual's federal conviction
for a $585.00 overcharge to the Medicare program. In this case, there are no
civil penalties at issue, only
an exclusion designed to protect the Medicare and Medicaid programs. See Charles
J. Burks, M.D. v. The
Inspector General, DAB Docket No. C-111 (11/16/89).
CONCLUSION
Based on the law and undisputed material facts in the record of this case,
I conclude the I.G. properly
excluded Petitioner from the Medicare program, and directed his exclusion from
the Medicaid program, for
the minimum mandatory period of five years.
IT IS SO ORDERED.
______________________
Charles E. Stratton
Administrative Law Judge